• Prior to 1964, U.S. quarters and dimes were 90% silver. From 1965 to 1970 they were 40% silver “clad” over a copper-nickel or “cupronickel” mix. Like the paper dollar, quarters and dimes were debased in two stages. Now quarters and dimes have no silver in them at all. They are now entirely copper and nickel, but only enough to get a little more than 1/4 their face value.
• Prior to 1983, U.S. pennies were 95% copper and 5% zinc. Pennies minted after that are 97.5% zinc with only 2.5% copper plating.
• The U.S. nickel has been cupronickel since 1946: 75% copper and 25% nickel with trace amounts of manganese. But that’s probably about to change…
Why are quarters and dimes no longer silver? Why is the penny no longer mostly copper? And why will the nickel likely follow suit fairly soon?

Because the amount of silver and copper and nickel in each case came to exceed the face value of the coin. The debasement of the U.S. currency over time has required the metal in the coins to be replaced with a cheaper substitute.

...

If you had seen the writing on the wall in the early 1960’s and started hoarding quarters and dimes while they still were almost wholly silver, you would have found that your dimes were worth a high of $3.57 each. Your quarters would have been worth $8.93 each.

In fact, these 90% coins still trade just like regular silver bullion bars and rounds. They were taken out of circulation — “hoarded” — by those savvy to debasement (Gresham’s Law tells us that good money will be hoarded when bad money floods the market). These coins were collected without any transaction costs. They were bagged up with different face value totals: $1,000 bags, $500 bags, $250 bags, $100 bags and $50 bags. These bags now sell with a transaction cost.

Each of these bags traded for over 35 times their face value because of the silver in the coins. At least they did at silver’s peak in 1980. Even after the peak and during the ensuing 20-year slump they were selling for more than three times face value.

Now thanks to waves of money and credit expansion from the Federal Reserve, silver (and gold) is pushing back toward its old highs. These bags of so-called “junk” silver are trading at more than 20 times their face value. They may hit 30 times face value again…and beyond…

And there’s a lot more potential for that trade to get even better.

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The best opportunity with silver coins has long passed. But there is still a similar opportunity with silver’s humble cousin, the cupronickel five-cent coin.

Copper is currently about $4.60/lb. Nickel is currently about $13.00/lb

120 five-cent pieces is $6.00. Those 120 coins contain a pound of copper and 1/3 pound of nickel. That's about $8.93.

If you deposit $6 in any bank in the nation, then withdraw your money as nickels, you get almost $9 worth of metal. That’s an immediate 50% return. That’s like paying for two thing and getting three.

You can’t legally cash in on it now (anti-smelting laws for pennies and nickels were introduced in late 2006). But the bullion market for cupronickel coins will develop, just as it did for silver U.S. coins. This will happen once the government starts minting five-cent pieces made out of cheaper metals.

To those who doubt this will happen, I refer you to the bags of silver coins trading as bullion for over 20 times their face value. You can easily order such a bag right now by going to any of a number of online bullion dealers. These bags of coins sell right alongside silver bars and rounds.

Right now, the government is subsidizing your copper and nickel purchases…and cutting out the middleman. As much as we complain about government, we ought to stop and offer them a little thanks for this.

The debasement of the U.S. nickel is looking very likely. Right now you have another opportunity to do what the silver coin hoarders did back in the early 1960’s.

Hoarding nickels right now gives you an immediate benefit. You get between $0.07 and $0.08 of copper and nickel for a mere $0.05. Thanks to Uncle Sam. But your good uncle won’t subsidize this forever. He can’t afford it.

What’s even more is that there is a hedge against deflation risk that you just don’t get with bullion. You see this discounted metal is minted. It will always have a nominal value of what’s stamped on it by its issuer.

So if the dollar strengthens and copper, silver, and gold all get cheaper in dollar terms, you can still spend your nickels just like any other money. Your purchasing power stays the same, maybe even increases.

But if the dollar declines, then the value of the cupronickel in the currency will rise against the face value. Eventually — at two or three times face value — these five-cent pieces will trade as bullion just as 90% silver quarters and dimes did and still do.

Again, there is currently no transaction cost to saving in nickels and no risk from plummeting metal prices. There is literally nothing (in case of deflation) to lose and everything (in case of inflation) to gain.

I view pennies and nickels as a no-lose proposition. As someone who has spent most of his life in the metals biz, I've seen my share of could'ves, and should'ves. I know a guy that built a very nice house in Glen Ellen (Chicagoland) with a modest buy of ferrocolumbium (now called ferroniobium), when the price skyrocketed.

Now, no one is gonna do that with US coinage, but there is a definite upside. The 95/5 pennies and the 75/25 nickels present folks of modest means a way to preserve their wealth against inflation and even deflation. In the inflationary scenario, prices of copper and nickel will continue to rise to the point where even the imbeciles in charge of the Mint will be forced into changing the nickel to steel or aluminum. The 75/25 nickel will be in somewhat of a similar position as pre-65 90% silver coinage and I'd venture a rise in the price of zinc where even the 5/95 pennies will be worth substantially more than $0.01. At this point, I predict the Mint will stop production of both coins and prices round up to the nearest $0.10. This has happened is several countries, Australia come to mind. After this, the melt ban on pennies and nickels will be lifted.

With the melt ban gone, 95/5 pennies will fall into the #2 copper scrap price and the 75/25 nickel will be indexed to the 30% cupronickel prices.

I exchange FRN's for nickels on a regular basis and sort them from my pocket change. I also have kept all my pennies for years. I don't have a Ryedale sorter, but will either borrow or buy one used at some point. Getting pennies from the bank is one thing, but getting them to take the 5/95 rejects on a regular basis is quite another. People with more time than me, make a project of getting large quantities of pennies, sorting them and drive around finding "dump" banks to take the 5/95 "rejects". It doesn't take too many sorters in a small area to drive the percentage of 95% pennies way down. Perhaps I'm lazy, but I'll stick to nickels, thanks.

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